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9 Great Product and Service Differentiation Strategies

Kit Jenkin
14 Dec 2021

Creating a distinctive brand is essential in securing the success of your business.  If you don’t stand out from your competitors, you’ll end up getting lost in a sea of options. People need a reason to buy from you, and part of that comes from differentiating your products and services through marketing, price and operations. 

Here are some product and service differentiation strategies you can use to draw more customers to your business. 

What is a differentiation strategy?

A differentiation strategy is a strategy you use to differentiate your products or services from your competitors. It often means identifying unique selling points about your products or services in a way that highlights the differences between them and your competitors and shows customers why you’re the better business to buy from. A differentiation strategy not only involves intimately knowing your competitors - it also involves intimately knowing your own product or service and developing a solid value proposition.  

Why create a differentiation strategy?

If you do it right, a differentiation strategy can lead to improved brand awareness and more sales. It may also give you a competitive advantage if you can differentiate your products or service for particular sections of the market that are unserviced.  

How to create a differentiation strategy

There are a couple of ways to approach your differentiation strategy. One is to create extremely distinctive products or services that offer new and increased value to the customer. Another is to take a product or service that offers marginally increased value to the customer but to market it in a way that makes it more distinct. 

Figure out what you want to present

Start by selecting a product or service that you offer. Then, figure out what you need to amplify or promote to differentiate this product. 

Ask yourself questions like:

  • What problem is this product or service trying to solve?
  • What do I want my company to be known for?
  • What problems aren’t being solved in the market?
  • What makes my product or service unique in the market?
  • How can we communicate this uniqueness in a way that draws people in?

While doing this research, you should review your competitor’s products and how they differentiate them, and simultaneously analyse your own products and services to see how they’re unique from others.

Do some research on your target audience

Once you figure out how to differentiate your product from your competitors, you’ll want to do some market research on your target audience and customers. After all, you need to understand the people you’ll be selling to. 

Ask yourself questions like:

  • Who is my ideal customer?
  • What are the pain points of my ideal customers? 
  • How does my product or service address these pain points?

There are many ways you can research your target audience. Common research methods include:

  • Conducting surveys
  • Data collection at the point of sale
  • Focus groups

The information you receive through these methods will help you better understand what your customers want and better position yourself in the market to appeal to them. 

Types of differentiation strategies

There are many ways you can differentiate your products or services from others. Here are just a few examples. 

1. Novelty

Your product can be differentiated from your competitors by being completely unique. It’s easiest to be novel when your product or service is the first to market. For example, Apple’s iPhone was incredibly successful because it was the first iteration of the modern smartphone. They differentiated themselves in the market by being the only company offering this unique product. 

2. Price

One of the most obvious ways to differentiate your product or service is to focus on your pricing. Depending on the product or service, it may be better to differentiate by offering a lower price to offer a better deal than your competitors and to attract bargain buyers. Or, you could price your product or service higher, conferring on it the added status and desirability of a high-end item. You could look at a price differentiation strategy or a cost focus strategy

3. Performance

You could differentiate your product or service by promoting its improved performance. This can be especially useful in spaces like tech, where the performance of a product is directly tied to buying incentives. If, for instance, you’re in the market for a car, and you’re choosing between two models, and one has higher performance for fuel efficiency, you’re probably going to go with that one. 

4. Production

Many companies try to promote their products and services by extolling the virtues of their production. For example, it’s very common for some consumers to prefer certain products because they have an ethical production process or use particular materials that the consumer wants or needs. 

5. Location

Some products or services are tightly bound up with their location. A hospitality or retail operation, for example, might offer products that are distinct to their local area. You might be a restaurateur that owns the only Mexican restaurant in your neighbourhood. Or, if you’ve identified the demands and emerging trends in your local area, and you own a bike shop, and you may extend your product line to include electric bicycles if they’re growing in popularity where you trade. 

6. Design

Some products differentiate themselves with impeccable designs. Apple is another great example of product differentiation focusing on design. The design of many of their devices is often the main selling point - many love Apple’s minimalist, high-quality approach to constructing their products, an approach that makes many of their competitors look cheap and flimsy in comparison. 

7. Added service

If your product doesn’t necessarily stand out too much from the crowd, you may be able to add extra features to your offer. Things like extra customer support, free refills, discounted add-ons, and other features can make your product seem like a better deal than it first appears and may offer more value to your customers than your competitors can. 

8. Niche appeal

Another way to differentiate your product or service is to design, create, and market it to a specific segment of the market you know needs attention. This type of product differentiation is very easy because, if done right, you have an entire segment of the market all to yourself and don’t have to come up with too many other ways to make your product stand out. 

9. Customer experience

Some companies like to emphasize the experience of a product rather than its inherent characteristics. They will tout the experience of using a product and service over what the product or service actually surprised. Airlines are good at this. They will promote the destinations of their travel when they indeed sell transportation to that place. A restaurant with a unique ordering system, like a buffet or Movenpick-style kiosks [1], might entice some people into the restaurant looking for a unique experience, even if the same food served may be comparable to a standard sit-down restaurant.

Control all stock and inventory from your EPOS

Differentiating your products and services from your competitors is incredibly important, but what can be just as important is keeping all your inventory straight. What good is differentiating your products if you can’t even find them in your stockroom?

With an Epos Now EPOS system, you can manage all aspects of inventory.

  • Track single item performance so you can forecast with accuracy
  • Receive stock alerts so you never miss a selling opportunity
  • Easily add, edit and bundle items to create new revenue opportunities
  • Create automatic purchase orders so you never run out of stock
  • Use valuable information to create smarter​ marketing campaigns​
  • Set up loyalty schemes for your biggest fans​
  • Issue store credit and branded loyalty cards with ease​
  • Use promotions to give customers a reason to spend

Contact Epos Now to learn more about our systems.